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Investors urged to stay on the sidelines, as STI sees largest single-day drop in over 10 years

SINGAPORE — The Singapore stock market on Monday (March 9) suffered its largest single-day drop since October 2008, as markets around the globe were battered following a plunge in oil prices that fuelled rising alarm over the economic impact of Covid-19.

Markets experts warn investors to be cautious about trying to pick up bargains amid the current market turbulence.

Markets experts warn investors to be cautious about trying to pick up bargains amid the current market turbulence.

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SINGAPORE — The Singapore stock market on Monday (March 9) suffered its largest single-day drop since October 2008, as markets around the globe were battered following a plunge in oil prices that fuelled rising alarm over the economic impact of Covid-19.

After weeks of slow and gradual decline, the benchmark Straits Times Index (STI) nosedived 6 per cent — shedding 178.61 points to 2,782.37.

It was the worst fall since the height of the global financial crisis and dragged the main market index to its lowest levels since 2016.

The massive selloff across the globe was triggered by a plunge in oil prices after the world’s major oil producers failed to reach an agreement on cutting production, which sparked a price-cutting war in an environment where supply is exceeding waning demand.

Among many global losers, Japan’s Nikkei sank 5 per cent and Australia’s ASX 200 dived 7.3 per cent.

Market experts in Singapore warned investors not to take their chances during such turbulent times, and to leave the analysis and guesswork to the professionals.

The STI, an index which tracks the performance of the top 30 companies listed on the Singapore Exchange, saw all three banks here — DBS, OCBC and UOB — fall by at least 6 per cent. Conglomerate Keppel Corp tanked by almost 10 per cent, Genting Singapore dropped 6 per cent and Singapore Airlines was down 4.5 per cent.

Analysts warned investors against thinking that this might sound like a good time to enter the stock market and pick up some bargains among blue chips.

They said that this is a time to be extra cautious because the confluence of factors that are causing the current market carnage is unprecedented, and there is no knowing how long the market bloodshed will last.


The plunge in the STI, experts told TODAY, was largely due to a meeting of two “black swans” — an oil price war and an airline industry robbed of demand from the Covid-19 outbreak. A black swan event is one that comes as a complete surprise and has deep consequences.

On Friday, Russia refused to join the Organisation of the Petroleum Exporting Countries (Opec) in a large production cut as the Covid-19 outbreak continues to slow the global economy along with the demand for oil, the New York Times reported.

In retaliation, Saudi Arabia decided to cut oil prices by nearly 10 per cent on Saturday.

Price wars such as these have led to steep falls in oil prices before, as in 2016. However, experts said that with the Covid-19 outbreak looming in the background, there are no “winners” in this situation.

Mr Song Seng Wun, an economist at CIMB Private Banking, said that when there is a sharp fall in oil prices, there will normally be winners and losers, but in this instance, it is a “loser-loser” situation.

“Normally, the airline industry has been the primary beneficiary of such a sharp plunge in oil prices. Now, no one wants to take (a plane).

“Had it just been the oil price war without the coronavirus outbreak fears, we would all be travelling to Japan for S$1 priced tickets. But now, even with that pricing, we would be scared to go,” he said.

Ms Pan Jingyi, a market strategist at brokerage firm IG, said that besides the fall in oil prices, the increase in the number of infections outside of China has caused negative sentiment in the market.

This is due to the growth in Covid-19 cases in countries such as Iran, Italy and South Korea, where case numbers have spiked from the tens to the thousands in the span of weeks.

“The backdrop still being the coronavirus impact that’s causing quite a lot of turmoil in the market,” she said. “The hit on demand is already the general situation in the market, and the market has processed that in.”


Mr Terence Wong, chief executive officer of fund management company Azure Capital, said that due to the “many unknowns out there”, punters should not be investing “aggressively” at the moment.

“It could have other impacts on other parts of the economy that you may not think about,” he said. “If you asked me last week, I couldn’t tell that this would happen… There will be a high degree of risk (to invest) right now.”

Agreeing, Mr Song said that investment during such dire circumstances should be left to the professionals.

“We have the virus outbreak plus a price war, I don’t think laymen are equipped to deal with this kind of fluid landscape,” he said.

Though the experts generally warned against investing during this period of turmoil, there could be a sliver of opportunity for those willing to take the risk.

If one had to choose certain industries to invest in, it should be more stable industries such as primarily consumer staples, which includes producers of food, household goods and other essentials, Ms Pan said.

Mr Song added that the healthcare sector, especially health care services and medical equipment manufacturers, are set to do well during this period.

A larger risk would be to invest in cyclical stocks, those that are tied to the business cycle, Ms Pan said. These include companies in the industrial sector or those that deal with energy production.


The rate at which the market will recover depends not just on the spread of the virus, but the fear among the population, the analysts said.

Mr Wong of Azure Capital believes that the market will recover when the number of cases stabilises. Now that the number of cases is still “jumping around”, this will cause uncertainty in the market, he said.

“If you look at China, the number of new cases has already been decreasing,” he said. “If, globally, we didn’t see wild numbers… I think we could have already made a recovery in the market.”

Mr Song agreed that consumer fears play a bigger role in curbing demand than the actual number of cases does.

“(Chances of a rebound) depends on how confident market participants are about the outbreak being contained, the most important being the fear factor,” he said.

However, when a rebound will come is hard to tell, which makes it difficult to know when one should start investing again.

Ms Pan said: “With every market shock, there will be a recovery, but the problem this time is that we are dealing with something that is very uncertain (with the) coronavirus. Perhaps we will need to see a vaccine come through, to be a remedy (to the economy).”

In the meantime, players in the market can only hope that the worst will be over soon, but there is no indication of how big the hit on the market will continue to be, or how long it will last.

The analysts said that they expect the STI to fall further to around 2,500-point levels, down from the current 2,782.

In the last five years, STI closed at its lowest of 2,539 points in February 2016.

Mr Wong said that it is ultimately wiser to hold off investing during an uncertain economy rather than hope to profit from it.

“You can see the tide coming, but you can’t tell how big it’s going to be,” he said. “If it’s a ripple, that’s fine. But what if it builds up to a tsunami wave?

“There’s no need to be a hero… I still think that cash (rather than investments) will be king right now.”

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